The settlement means London Met will not go ahead with its judicial review against the Home Office, which had been scheduled to start on 17 October.
London Met’s sponsor licence was reinstated in April this year, but it had nevertheless been pressing ahead with its legal action in an attempt show the original decision was unlawful.
The Home Office said in a statement that it was “pleased we have been able to take a co-operative approach with London Metropolitan University and that they have decided to withdraw the judicial review”.
It added: “We acknowledge the improvements they have made to their systems and procedures, and will continue to offer them any necessary support.”
London Met, where Malcolm Gillies is vice-chancellor, said in a statement that it was “pleased that, following negotiations with the Home Office, terms of settlement of a forthcoming judicial review have been agreed between the parties. Both parties now agree it is in neither party’s interest for this case to continue to judicial review.”
The UK Border Agency, formerly part of the Home Office, revoked London Met’s sponsor licence in August 2012, although some reports suggested that it was Theresa May, the home secretary, who ordered the move.
The decision led to deep concern across the sector and within the Department for Business, Innovation and Skills about potential damage to the international reputation of UK higher education.
The UKBA had said more than a quarter of London Met’s international students in a sample had no permission to be in the UK. It also said the university’s monitoring of international students’ attendance and its record-keeping on their language standards were inadequate.
In September 2012, London Met won a High Court ruling granting it permission to seek judicial review of the revocation decision.
The High Court also ruled that existing London Met students who met immigration requirements should be allowed to continue their studies.
London Met said in its statement that it “continues to recruit a large number of international students” following the reinstatement of its licence.
The Home Office also said in its statement: “We welcome the brightest and best who wish to study in the UK.
“Latest figures show that sponsored student visa applications for our world class universities have increased, while our measures to cut out the abuse of student visas are working. Net migration is down by a third since 2010.”
London Met estimated in its 2011-12 financial accounts that it was expecting to lose £37 million in income in 2012-13 in the wake of the revocation, although it also blamed the projection on “a difficult market” for UK and EU students in the first year of higher domestic tuition fees.